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A Statement of Financial Position or Balance Sheet, has three sections: Assets,

which are the resources owned; Liabilities, which are the company's debts; and Owner's
Equity, which is the contributions by the owners and company's earnings. The formula
that defines the balance sheet is: Assets = Liabilities + Owner's Equity. It gets its name
from the fact that the two sides of the equation – assets on one side and liabilities plus
owner's equity on the other – must balance out.

Investors, creditors and other statement users analyze the balance sheet to
evaluate such factors as liquidity, solvency and the need of the entity for additional
financing.

Liquidity is the ability of the entity to meet currently maturing obligations.

Solvency is the availability of cash over the longer term to meet maturing obligations.

Information about liquidity and solvency is useful in predicting the ability of the entity
to comply with its future financial commitments and to pay dividends.

The information needed to complete a balance sheet can be found on the


company’s general ledger where all financial transactions for a particular period would
have been recorded. The steps in making the balance sheet are:

Step 1: Complete and compute the Total Assets Section

Assets are resources or things of value owned by business and is classified into
current and noncurrent.

Current assets are things that can be converted into cash within a year or less while
noncurrent assets are long-term investments where the full value will not be realized
within the accounting year.

They are arranged by their liquidity—the facility by which they can be turned into
cash—starting with cash itself and moving into long-term investments.

Step 2: Complete and compute the Total Liabilities Section

Liabilities are claims of creditors against the assets of the business and is classified
into current and noncurrent.

Current Liabilities include cash spent, as well as any debts that must be paid out within
one year while noncurrent liabilities refer to bills due anytime after one year.
They are arranged on the balance sheet in order of how soon they must be repaid.

Step 3: Compute the Net Worth

Net Worth or Owner’s Equity is the residual amount after deducting liabilities from
assets. It is increased by capital contribution of the owner and net income of the
business, and decreased by the owner’s withdrawals and net losses of the business.

It is described as owner’s capital in sole proprietorship; partners’ capital in partnership;


and shareholders’ equity in corporation.

The formula that defines the balance sheet is:

Assets = Liabilities + Net Worth

The formula can be converted to get a definition of net worth:

Net Worth = Assets - Liabilities

Step 4: Compare the Total Assets and the sum of Liabilities and Equity

The two sides of the balance sheet - assets on one side and liabilities plus owner’s
equity on the other- must balance out, otherwise something must have gone wrong
during the process.

A balance sheet shows the health of a business for a period. Managers should take
the opportunity to compare the progress and trend of a business by regularly
evaluating and comparing balance sheets of past time periods.The information that we
can get from the preparation and analysis of it, is one financial management tool that
may mean the difference between success and failure.
Making a Balance Sheet

1. Background of the topic


2. Importance of Balance Sheet
3.Process
3.1 Complete and compute the Total Assets Section
3.2 Complete and compute the Total Liabilities Section
3.3 Compute the Net Worth
3.4 Compare the Total Assets and the sum of Liabilities and Equity
4. Conclusion
Assignment
in
English
(Technical Writing)
Submitted by:
Dela Rosa, Friendaline N.
Palada, Jana Rose V.
Casillano, John Rick D.

Submitted to:
Prof. Emily Celada
Assignment
in
English
(Technical Writing)
Submitted by:
Canayong, Rowena P.
Basa, Marlou L.
Beltran, Michaela C.
Asinas, Jhoan E.

Submitted to:
Prof. Emily Celada
A statement of financial position or balance sheet, has three sections: Assets, which
are the resources owned; Liabilities, which are the company's debts; and Owner's
Equity, which is the contributions by the owners and company's earnings. The formula
that defines the balance sheet is: Assets = Liabilities + Owner's Equity. It gets its name
from the fact that the two sides of the equation – assets on one side and liabilities plus
owner's equity on the other – must balance out.

Investors, creditors and other statement users analyze the balance sheet to
evaluate such factors as liquidity, solvency and the need of the entity for additional
financing.

Information about liquidity and solvency is useful in predicting the ability of the
entity to comply with its future financial commitments and to pay dividends.

The information needed to complete a balance sheet can be found on the


company’s general ledger where all financial transactions for a particular period would
have been recorded. The steps are:

Step 1: Complete and compute the Total Assets Section

Assets are resources or things of value owned by business, and is classified into
current and noncurrent.

Current assets are things that can be converted into cash within a year or less while
noncurrent assets are long-term investments where the full value will not be realized
within the accounting year.

They are arranged by their liquidity—the facility by which they can be turned into
cash—starting with cash itself and moving into long-term investments.

Step 2: Complete and compute the Total Liabilities Section

Liabilities are claims of creditors against the assets of the business and is classified
into current and noncurrent.

Current Liabilities include cash spent, as well as any debts that must be paid out
within one year while noncurrent liabilities refer to bills due anytime after one year.

They are arranged on the balance sheet in order of how soon they must be repaid.
Step 3: Compute the Net Worth

Net Worth or Owner’s Equity is the residual amount after deducting liabilities from
assets. It is increased by capital contribution of the owner and net income of the
business, and decreased by the owner’s withdrawals and net losses of the business.

It is described as owner’s capital in sole proprietorship; partners’ capital in


partnership; and shareholders’ equity in corporation.

The formula that defines the balance sheet is:

Assets = Liabilities + Net Worth

The formula can be converted to get a definition of net worth:

Net Worth = Assets - Liabilities

Step 4: Compare the Total Assets and the sum of Liabilities and Equity

The two sides of the balance sheet - assets on one side and liabilities plus owner’s
equity on the other- must balance out, otherwise something must have gone wrong
during the process.

A balance sheet shows the health of a business for a period. Managers should take
the opportunity to compare the progress and trend of a business by regularly
evaluating and comparing balance sheets of past time periods.The information that we
can get from the preparation and analysis of balance sheet, is one financial
management tool that may mean the difference between success and failure.
Balance Sheet
1. Background of the topic
2. Importance of Balance Sheet
3.Process
3.1 Complete and compute the Total Assets Section
3.2 Complete and compute the Liabilities Section
3.3 Compute the Net Worth
3.4 Compare the Total Assets and the sum of Liabilities and Equity
5. Conclusion